Satia Industries Limited (539201) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Satia Industries Limited Q4 and FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Diwakar Pingle from EY. Thank you. And over to you, sir.

Thank you so much, Renju. Good afternoon, everyone. On behalf of Satia Industries Limited, I welcome all of you to the company's Q4 and FY '23 earnings conference call. You would have already received the results and investor presentation, which is also available on the exchanges and the company's website. To discuss the company's business performance in the quarter gone by, we have with us today the top management of Satia Industries, represented by Mr. R.K. Bhandari, the Joint Managing Director; and Mr. Rachit Nagpal, the Chief Financial Officer of the company. Before we proceed with the call, please note that anything that is said in this call during interaction and the collaterals, which reflects the outlook towards the future, which may be construed as forward-looking statement must be viewed in conjunction with the risks the company faces and may not be updated from time to time. More details are provided at the end of the investor presentation and other filings that can be found on the company's website at www.satiagroup.com. With that said, I'll now hand over the call to Rachit Nagpal. Over to you, Rachit.

Thank you, Diwakar ji. Very good afternoon. I would like to welcome, everyone, to the earnings call for Satia Industries Limited, where we will be discussing the financial results for Q4 and financial year '23. Our company is a fully backward integrated paper pulp producer that is based on agro and wood resources. We benefit from our strategic location in India's wheat belt, which ensures a steady supply of raw materials throughout the year. We are pleased to announce that our Q4 and financial year '23 results are strong, with the third consecutive quarter of improvement in EBITDA margins. This is due to a healthy pricing environment and cost-cutting measures such as caustic soda recovery, clean and green energy production capabilities. Our Q4 financial year '23 sales and EBITDA was one of the highest, with revenue from operations growing by 75% year-on-year to INR 5,206 million and EBITDA margins reaching 26.2%, which are one of the historic highs. We attribute this growth to our strong relationships with state boards with a healthy order book. For financial year '23, our revenue from operations increased by 111% year-on-year to INR 18,837 million. Our focus on profitability has yielded qualitative results, with EBITDA margins improving for the third consecutive quarter. Our Q4 financial year '23 EBITDA was INR 1,362 million and margins were 26.2%. Strong volume, healthy order book and higher operational efficiencies are the key factors for the improvement. Our cost of material consumed has come down to 40% in quarter 4 financial year '23 as compared to 50% in Q4 financial year '22 and 47% in Q3 financial year '23. Our financial year '23 EBITDA grew by 123% to INR 4,118 million, with margins of 21.9%. We expect margins to remain sustainable as long as prices remain at similar level, which we anticipate will be the case based on the current scenario. Our PAT for Q4 was INR 463 million, a growth of 57% year-on-year. However, we have made some changes to our depreciation estimate with regards to residual value, resulting in additional non-cash depreciation amount fully booked in Q4. Our PAT grew by 91% to INR 1,922 million. Our order book is healthy, with over 24,000 tonnes to be executed in Q1 financial year '24. We have recently received orders of over 8,000 tonnes from Gujarat and Telangana state boards, providing us with solid revenue visibility to steer through any volatility in prices. We're also pleased to report that we have currently commissioned 2 machines of 1 tonne each. We would share some more information later during the year. Given our strong cash generation capabilities, we have made significant progress in reducing our long-term debt. In addition to normal debt repayments, we had repaid INR 350 million till April '23, out of which the payment of INR 263 million was made in April '23 itself, the rest in financial year '23. Our credit rating has also been upgraded by Fitch India Rating and Research from A to A positive with a stable outlook. Lastly, we are happy to announce that our Board has declared a total dividend of 40% for financial year '23. We believe that the paper industry will continue to grow given the national education policies emphasized on a wider range of subjects, including arts, sports and vocational skills, which creates new opportunity for our writing and painting paper segment. Thank you for joining us. And we will now move to the Question-and-Answer Session. Thank you.

[Operator Instructions] The first question comes from the line of [ Manan Poladia ] from MKP Securities.

First of all, congratulations on a great set of numbers. So, my first question is on the depreciation end of things. I know there is a one-off INR 60 crores write-off that you have taken. What I wanted to understand was that the rest of the INR 50 crores depreciation that is there relative to Q-o-Q INR 33 crores, right? So that extra INR 17 crores line item will be there in every quarter going forward?

No, no, this is a one-time activity like we have change our estimates in respect of depreciation. So on the basis of technical advice and recommendation with our auditors, we have changed our estimate in respect of depreciation. Earlier, we were taking residual value at 10%, which is now revised to 5%.

That I understand.

With this change, the depreciation would be [ INR 126 crores ] [Technical Difficulty] for this financial year [Technical Difficulty] about INR 80 crores.

Right. Okay. So, you're saying -- what will be the straight line -- like what will be the depreciation line item going forward in the coming few quarters?

INR 125 crores approximately.

INR 125 crores for the whole year?

Yes. For the next year.

So about INR 33 odd crores per quarter, right?

Yes.

Okay. I understood. So that's my first question. Also, my second question is on the cutlery that we were supposed to manufacture. I read that you've installed 2 of the machines, right, already?

Yes, yes.

So, what is the guidance on that segment going forward? Are we going to install the rest of the 6% this year or next year?

Yes. Actually, those 2 machines have been erected, but they are still under commissioning, the production rate that was to come hasn't come so far. But we are confident that, that was the part of the deal that if they give us 70% of the rated capacity minimum, we will immediately take delivery of the next machines. So once we achieve this efficiency of 70% within, say, next 10 days to 15 days, which we'll come to know, then we will decide the future course. And we are simultaneously trying to run 2 machines of Zume also lying with us. We are trying to source out some expertise where we can run those machines also. Yes.

Right. Understood.

Next question comes from the line of [ Vishal Prasad ] from [ VP Capital ].

So the first question that I have is, what benefit we get under Section 80IA? What are the conditions we need to fulfill to get the benefit?

So 100% of the eligible profit, which we earn from our cogeneration division, which is power generation division is eligible under this section. So for this year, currently, it is almost INR 120 crores.

Yes. I understand. Sir, what are the conditions that we need to fulfill? As government prescribed, these are the conditions that the companies need to fulfill to get the benefit?

Conditions like we have to maintain separate books of accounts. We have to separate our power generation from the paper division. So, that is why we are reporting separately the results of this power generation. And the machinery should be -- the new machinery. So these are the conditions of Section 80IA, which we [Technical Difficulty].

Okay. And why I asked this, in West Coast, they used to get the benefit until 2020. However, the assessing officer disallowed it 2 years, 3 years back. So, are we sure -- I mean, we are eligible because none of the other companies are getting this benefit and West Coast also was disallowed after getting the benefit for 20 years?

So since 2018, we are getting this reduction, and there is no disallowance in the past. And we are hoping for the best, like the -- you will agree that in the next few years also, we are doing it on the transfer pricing mechanism, which we are -- which we have taken that advice from Big 4, and we are very hopeful the same will be allowed in the later years, too.

Okay. And is there a sunset date for this facility?

Yes. We have started in 2018. So basically, there are 2 divisions. So for the first division, we have started taking it from 2018, so from 10 years from that. And first cogeneration too, we have started taking in 2021. So, our sunset date would be 2031.

Okay. Got it. So the next question that I have, sir, is what percent of our revenue has come from state boards this year?

Yes. It is approximately 40% to 45%.

Okay. Sir, if I look at the market and what we have told in the past, it's a 5 lakh tonne market. And we are a very strong player there, but we still stick to 10%, 15% of it. So could you talk about why we shy away from increasing our revenue from state boards?

Yes. I'm Bhandari this side. I would like to comment on that. Actually, we have 3 machines which have watermark papermaking facility. So on those 3 machines, we make almost 1.35 lakh tonne of paper every year. And since we have our own dealer network also, more than 85 dealers, so we have fixed quota for them which they lift every year. So, we have to maintain that balance every year. So number one, because of the limit of the watermarking capacity on the existing machines and number 2, because we want to maintain our share in the open market also. So, that's why we have kept it anywhere between 50,000 tonnes to 60,000 tonnes every year. But of course, looking to the market scenario, we can always increase or decrease it. That is not an issue.

Okay. So sir, when we bid for these state boards, do we see the larger players there like JK or Century do -- are those -- they are competition or is it smaller players?

Century paper mill, they do come in many tenders. JK, West Coast, all these players, they come into the cover segment. Ballarpur also, cover paper for the books. They normally quote for that segment. Since they do not have machines where they have watermark papermaking facility, so that is one reason they are not able to quote. Yes. And then they have their own network also, which maybe is good enough to lift whatever they are producing. So either you can have that option or you can go in for this option. So, that balance one has to see, looking to one's own consideration in the state industry, yes.

Okay. And sir, if we look at JK and TNPL, they have very strong relationship with the farmers, which gives them access to 25,000 acres and 40,000 acres of hardwood plantation. Mostly, these are farmers, they grow it for JK and TNPL, just ensure that the supply of wood chips comes to them whenever they want. So are we as a company looking to build such relationships with the farmers so that we have that trust-based relationship? And they supply to us, mostly to us because we are increasing the capacity of our wood chip pulp plant, and we would be needing lot of wood chips.

One factor is, like you know, Punjab, Punjab is a very rich agriculture area. The farmers are very rich and landholding is also very good and land too is very fertile. So what they do here is whatever agroforestry we encourage, we encourage farmers. We every year, during the season time, we have Operation Green with us and our raw materials within the raw material team. They distribute less and less of free saplings to the farmers for growing on the bumps of the boundary of their fields. So that is how whatever best we can do in our area, we are doing it. And we are conscious [Foreign Language] this is our social responsibility also. So whatever wood we use, we must plant that. So, we try to maintain that balance somehow with that. Yes.

Yes. One last question, sir. So JK has put up a small corrugated plant in Ludhiana. I mean, previously, we used to mention that within 100 kilometers, there are no paper mills. Now, JK is there and they have put up a small plant. And I believe once they are comfortable with the plant, they are going to increase the capacity. So are we going to face challenges in terms of sourcing the raw materials sometime in the future?

Point is that they are only making the boxes. They are not producing any paper in this region, number one. So even today, our major sourcing, almost 30% is from local area, which will remain good for supply for us only. And rest is from J&K, Sirpur area, Yamunanagar and then UP. So here, all the mills who are in this field, they are all sourcing from this region. So, I think everybody is getting is share here.

[Operator Instructions] Next question comes from the line of Prashant Rishi from Cascade Capital.

Sir, is the PM4 backward integration project? Is it complete?

Yes. Wood pulping backward integration for PM4 is 50% already complete. Earlier, we could make 180 tonnes of wood pulp from our existing pulp mill. Now, we can go up to 250 tonnes. But looking to the falling prices of hardwood pulp in the international market, so maybe we may or may not be using that capacity in near future -- in this year. We may be buying and using imported hardwood pulp to some extent, could be more useful. So, that is how the company is going to work in this financial year. But definitely, we can today make 250 tonnes of hardwood pulp against our earlier capacity of 180 tonnes, which is good enough for PM4. Yes.

Okay. Sir, next question, you said pulp -- international hardware pulp prices are falling. Can you share some numbers? And for paper prices also.

Yes. From $960 per tonne, it has come down to anywhere between $500 per tonne to $550 per tonne. And paper prices, you already know, international paper prices, they are anywhere in the range of $950 to $950 plus minus depending upon the quality.

Okay. And paper prices have also come down, sir?

Yes. Definitely, they have come down. International paper prices have come down. But in India, so far the paper prices due to strong demand in the indigenous market, they haven't come down. Only last month, big mills, they already increased some price and even B-grade mills, they also increased some price. But maybe once season is over within the next 1 or 2 months, those mills who do not have the requisite orders, they may soften the prices to some extent. Maybe that is a possibility. We cannot ignore it.

Okay. Sir, what were the paper prices in international market earlier when the pulp prices were $960 a tonne?

Actually, at that time from India itself, we were exporting at $1,200, $1,150, $1,200 to Middle East and African countries and all these places. Now from China and Asian countries, so it's coming anywhere between $950. So, almost $200 barely you can say that.

Next question comes from the line of [ Harsh Jain ] from Raa Investments and Advisory, LLP.

Yes. First of all, congratulations for a great set of numbers. My first question is regarding, since you've mentioned that the paper prices internationally have been coming down. So are we able to sustain the current operating profit margin of around 26% for the current quarter and for the current financial year financial year '24?

Yes. Since we have already through at least 1 month, and we have orders in hand for another 1.5 months with us, so this quarter should be good at least to sustain the margin in this range, number one. And number 2, if the sale prices are coming down, the raw material prices, they have also come down. And chemical price, they have come down substantially, like caustic, which has gone up to even INR 65,000 per tonne, has come down to less than INR 34,000 per tonne. So all prices, they are coming to their older level. So whatever price reduction in the selling price may come, I think it will be offset by cost in reduction of raw material and chemical prices. So the margin on average basis, as we did last year, 21% EBITDA near about, so we should be able to maintain maybe. But EBITDA in the first quarter, since we have orders in hand via price realization, so we may have a good EBITDA in the first quarter. Yes.

So that's for full year?

Yes, please.

So for full year, can we expect EBITDA percent of around 23%, if not 26%?

Yes, 21% plus, minus anyway, depending upon -- so you know how many factors are there. Fuel prices, we cannot predict that. And raw material prices, definitely, they are damping at the moment. Chemical prices are down. So it depends upon the international scenario, like this opportunity has come that hardwood pulp prices are very down. So people are switching over to hardwood use imported more, so that they can save by producing their own wood pulp, which is proving little costly. Similarly, with prices, they have come down significantly by almost 30% plus. So wood waste -- we have 150-tonne deinking plant. So, we are making all those permutation and combination to see that we are able to restrict our cost of raw materials consume to 40% plus minus, which had at one point of time gone up to 47% when our EBITDA came down to almost 20%.

Okay. And my last question would be regarding our fuel and power costs. So any plans to further reduce it because previously, couple of quarters back, you mentioned that you would be going to buy stable from farmers to run your boilers and plant. So any status on this one?

Yes. Already, we have one boiler. 50% of the fuel is rice straw only, which is costing us less than INR 2,500 per tonne, even inclusive of insurance and storage and transportation costs, all inclusive, so against rice husk fuel cost of almost INR 7,000 to INR 8,000 per tonne. So, we are going to start our second boiler by December or January next year. And on that -- once that boiler starts, then our 100% fuel would be rice straw. This year also, we have purchased 1.5 lakh tonnes of rice straw from the farmers. And we are storing it, and we are using that fuel only. And 50% we are using rice husk. So next year, almost 80% to 90% will be rice straw and 20% should be rice husk. So, then our fuel cost will further go down substantially.

Next question comes from the line of BR Nahar from Mili Consultants.

Yes. Congratulations, Bhandari Sahab, and full team for excellent results. And I just wanted to know whether in line with the coal prices coming down, whether rice husk prices have also fallen. And if so, how much percentage wise?

Rice husk prices have definitely fallen. Last year, the peak price was almost INR 11,000 per tonne, rather in the last -- sorry, yes, it was INR 9,000 a tonne. So this year, it has come down by almost INR 2,000 a tonne, 20%, 25%. So, we do not know how long this trend is likely to continue. But since in Punjab, government is insisting more and more mills they use rice straw, especially the new industry and most of the mills are trying to switch on to that fuel. So, I think it should remain in this range only, INR 7,000 to INR 8,000 only.

Okay. And about the wheat straw, also where the prices have come down compared to last year?

Yes. Presently, it is in the range of -- as such basis, it is almost INR 6,000 a tonne, while earlier in the last year throughout the year, it was on an average of INR 10,000 a tonne.

So based on this price reduction in raw material and fuel prices, basically and keeping the selling price at the same level and also caustic soda has come down, as you mentioned, sir. So [indiscernible] in this quarter should expand like other means almost close to 30%. Can we expect in this quarter this kind of performance?

Yes. That's what I said, this quarter should be good, looking to all these things, as you rightly pointed out. And from next quarter onwards, it depends on the price of the paper, whether it remains stable or goes down.

My last question, sir, is about the old paper mills, the plan for increasing their speed and to increase the production of paper by minimum just debottlenecking. So when we can see the increased production, sir?

In this year like on the new paper machine we made almost 72,000 tonne paper, which was almost 200 tonne paper per day. So this machine has on average GSM of 60, a production capacity to make 300 tonnes. Because we have been making lower GSM paper so we made almost 200 tonne plus the downtime involved in handling the initial problems on the machine. So maybe we are able to get almost 20% more production on PM4 itself in the next financial year. So overall, our tonnage should be 8% to 10% higher quantity wise.

So we can expect close to 240 tonne capacity wise.

Last year we made 210,000 tonne, 209,000 tonnes. So next year could be anywhere between 225,000 to 235,000 tonnes, 230,000 in that range.

Next question comes from the line of Govindlal Gilada, an Individual Investor.

I got 2 questions. One on NEP demand, new education policy. On incremental demand, how much you're expecting, sir, this year and next 2, 3 years?

Actually I have been talking on this even earlier. So they say there are almost 25 crore students till Plus 2 in India. So if we take their average bag load is anywhere around average of 4 to 5 kg and we are able to -- the government is proposing to change curriculum part even 50% of the book. So we should see a tremendous increase in the demand, which could be almost equal to the consumption of writing and printing paper in India, which could happen over a period of, let's say, 1 or 2 years which is anywhere around 50 lakh to 60 lakh tonnes. And besides this, the help books, the guides, everything that gets published along with the basic text books, so that demand should come additionally. So I think next 2 to 3 years seems very good for writing and printing paper and all mills in writing printing segment should not face major problem as far as demand or the profits are concerned. So that is my perception of the market at the moment.

Sir, my second question is regarding this other expenses. They have gone up substantially quarter-on-quarter INR 122 crores to INR 144 crores. What was the main impact, sir, on that?

It is mainly because of the increase in the fuel cost itself. One was pro rata increase in the fuel cost, that was 1 part. And increase in fuel cost itself per tonne of paper led to increase of almost INR 4,000 a tonne. That was almost INR 84 crores. So these 2 things, one, pro rata increase in production and vis-a-vis and the cost of fuel consumed total cost; and second, increase in the price alone led to increase of INR 84 crores.

Actually coal prices have come down, sir, quarter-on-quarter?

We are not using any all since we are using only rice husk.

Almost [ 960 to 500 ] they have come down almost it is very huge. So you have not seen converters who import the pulp out of India or who make paper out of this pulp by buying from outside present captive so their cost of production will go substantially down. So you are not seeing that will impact domestic paper prices, sir?

The ups and downs in the paper prices, they may remain there like in any commodity otherwise also. But the main thing is we are able to maintain our margin so far. Definitely if there is an opportunity whereby we can use imported hardwood pulp or imported waste paper good quality and reduce our overall cost of raw material and chemical consumed. So everybody uses it to reduce one's cost of production only. So that is how we work all the time. We have to be as dynamic as the market is. So maybe prices reduce, then you are buying raw material at cheaper cost so your margins will remain more or less the same despite all those factors.

So there are 2 separate things, sir. One is because of input costs going down, margins will come down. Absolute I want to understand paper prices, how much from current almost [indiscernible] plus the domestic margin. How much they can come down? That is the thing I want to understand.

Yes, it could come down anywhere between 8% to 10%.

From current prices? That is for whole year we should take or it is of our...

Yes. I'm talking of the rest of the period that is likely to come in. It may come I'm saying vis-a-vis the import prices. So far in India, as I said earlier, the import prices, they were never in consideration. They were not a factor in the domestic prices so far because all mills were heavily booked, they were not able to make that deliveries. So even despite cheaper imports, which remain in the same level which was happening earlier due to whatever reason so nobody reduced prices. That did not have any impact on the indigenous paper prices. But presuming in the long run that effect may come with the downsizing of the indigenous demand if it happens, then prices to the most can -- as we do our calculation that even if they come down to 80, what kind of margins we will be having on that looking to our present costing. So we think even if it is at 80, 8% to 10% down, we still are able to maintain our margin of 21% plus/minus of EBITDA. So that is how we see that. So you can never take away -- yes.

Sir, to sum up, last quarter we had 26% margin and the paper prices, which comes down even INR 8, INR 9 also, some INR 3, INR 4 cost benefit we will get there, some 4%, 5% margin impact may come? That is there.

Yes, that's right.

That is there, okay. Last one thing, anything idea on wood prices -- wood chip prices, they have come down or gone up, sir?

Wood chip prices are now coming down because people are shifting to hardwood pulp so my cost -- if I buy hardwood pulp at $500 so my cost of imported hardwood pulp is cheaper than my indigenous hardwood pulping prices inside the mill. So this may affect in the long run on the local wood chip prices.

Next question comes from the line of Gurvinder Juneja from Fortuna Investment Advisors.

My question is about, sir, this year you have managed to utilize the new capacity and covered all the initial problems that may have come in expanding and producing efficiently. What is the outlook you have on further addition to the capacity in the next year and the year beyond?

I earlier said also like this year, we made almost 72,000 tonne on the new machine. So next year we could have additional tonnage of 15,000 to 20,000 tonne on this machine, which should happen in this year only so which should take our production to anywhere between 225,000 to 230,000 tonnes in this financial year. Secondly, we are proposing to increase the existing speed of PM3, which was running earlier, which is presently running at 650 meters. So we propose to take it to anywhere around 800 to 850 meters per minute speed. But that project will happen in the financial year '24-'25. So then it will increase the production of that machine by another 30 tonnes per day, which could be another almost 15,000 tonnes every year. So that is the future overall prospect so 15,000 to 20,000 tonne plus in this year and another 15,000 tonne in the next year. So that is the plan for next 2 to 3 years.

Next question comes from the line of Anilkumar Sharma, an individual investor.

Congrats on the great numbers. Sir, my question is in this year we have earned almost INR 400 crores of cash profit, which is a great number. But we have paid all the -- though percentage term it is 40%, but we have given only INR 4 crore dividend and that is very hampering our stock prices. If you see vis-a-vis your competitors, you know [indiscernible], they have paid -- on the smaller earning, they have paid the fee because they want a higher dividend. So that is the problem on the stock price is not increasing. So what is the policy on that? Can you give some color on that? It is too less. I think that INR 400 crore cash profit and INR 4 crore dividend is very lower side?

Yes, definitely we can put forward dividend feelings to the Board and we'll try to put it forward very, very strongly so that every shareholder is benefited. So the competitor announcing 300% dividend, everybody has his own strategy so we cannot comment on that. But definitely, as you said, we can take your request -- your perception to the Board.

Next question comes from the line of [ Utsav Anand ], an Individual Investor.

Congratulations on a great set of numbers. I would like to know regarding the employee expense has gone up from INR 23 crores to INR 30 crores. Am I audible?

Yes.

I would like to know regarding the employee benefit expense, right? Cost has gone up from INR 23 crores to INR 30 crores. I would like to know like what is the reason for that?

Actually you look at the specific numbers so then the total cost is insignificant. Even if earlier it was anywhere in the range of -- last year it was INR 4,227 per tonne of paper and this year it has gone up to INR 4,366 only. So one reason is when we had the new machine, we applied almost 500 more people. So that was one reason. But if you look at the cost per tonne, the increase is even less than 5%, which is very, very nominal.

Okay. So just wanted to confirm there's no increase in remuneration for the directors or the CEO, right? All that has been done?

Yes. Whatever has been done as far as the increase in the Directors' remuneration space, that is already in the public domain. So otherwise the total cost, if you look at the figures per tonne basis, so it is hardly more by 4%, 5%.

I just wanted to confirm the Director revision let's say for last quarter has not gone up.

Yes. This only relates to the normal increments.

Okay. Just wanted to confirm on that. And I think export orders, like how do we see the growth coming there?

Sorry? Pardon?

Regarding the export orders, how do we see the growth coming over there?

Actually export at the moment is not very competitive. As I said earlier, the paper from China is coming at the price of $950 to $980 anywhere in the world. So we are definitely doing export meeting demand of our customers who are attached with us, but that will remain within the range of 4% to 5% only so that it meets whatever export requirement we have to fulfill our obligations also. So we are not focusing much on the exports. So out of our total tonnage, 5% we may do export this year.

Okay. And just last question regarding finance cost like do we see this coming down this year? It was around INR 9 crores, approximately INR 10 crores.

Sorry, could you please repeat your question?

I just wanted to ask you the finance cost, right? The finance cost is around INR 10 crores with the profit margin steady, right? Do we see that cost coming down?

Yes, it will came down definitely. We are in the mode of repayment as already -- we paid INR 35 crores in the month of April. So we are reducing our debt and it will came down in the coming years.

Like you paid like INR 35 crores in February, right? Any amount that you're paying this quarter as well or no plans right now?

So we have already paid INR 35 crores in this quarter, INR 27 crores almost we have paid in April and INR 8 crores yesterday only. So we have target of around prepayment of INR 50 crores that is in addition to the normal repayment. So definitely so with this, the finance cost will reduce.

Congratulations on the great set of numbers.

Next question comes from the line of Vishal Prasad from VP Capital.

I have few more questions. So sir, for our 300 tonne wood pulp plant, what would be the annual wood chips requirement?

For 300 tonne plant, the requirement will be almost 1,000 tonnes to 1,200 tonnes of wood chips per day because that contains almost 50% moisture. So 600 tonne is the oven dry weight and if the yield is anywhere in the range of 47% to 48%, 50% so the pulp should be around 300 tonnes. So out of this, we don't buy only wood. We buy bamboo also, which is anywhere in the range of 200 to 250 tonne per day and then we buy veneer waste also, which is again in the range of 300 to 500 tonnes. And rest of the material, we buy fresh wood, eucalyptus or poplar.

For the CapEx that we have done, I mean we are going to get SGST exemption for few years. In one of the calls in 2020, we mentioned that getting the refund from the government is really tough. Bhandari sir, why did we say that?

Pardon?

For the CapEx that we have done, we are going to get SGST exemption that was applicable for many years. So in one of the calls in 2020, we mentioned that getting the refund from the government would be a bit difficult, exemption from the government in SGST. So I was wondering why did you say?

Rachit I think can better explain because the first project was started in the year...

I don't have the number right now so I think I can answer this separately.

Yes. Actually what happened that we had almost 3 projects, which we did in the past 7, 8 years. And the first project which we did then -- I don't remember that date at the moment, but still the benefit, the GST certificate that you have to get from the government, even getting that is the hell of a [indiscernible]. So we did meet the top authorities in the state. We had a meeting with the CM also he said he did give direction down the line. So that was the reason that I said. Normally whatever we do, we do based on our individual business viability, commercial viability of the business itself and whatever subsidy or benefit that we get from the government, that we take as a win part. So that is what I meant in that. That doesn't mean that we are leaving that unpursued. So we are strongly pursuing that also. There is a separate team. One of the projects given to E&Y this year. This new project of INR 500 crores. This was given to Ernst & Young only so that if there has been maybe some problem, some shortcoming in our pursual so they could do it a little better. So we are trying our best. Yes, that was the reason.

We haven't got anything from the government until now.

Yes. not as yet.

Okay. And sir, we have a CWIP of INR 137 crores. So what is this for?

So it is broadly 1 project is PM so the wood pulp modification project. The wood capacity addition is there. It is of INR 50 crores and we have made payment to the ITC boiler like we are enhancing the capacity of boiler. We have purchased secondhand boiler from ITC. So we have made some payments of around INR 20 crores. So majorly, these 2 items contributes in it. Rice straw boilers is also under progress so almost INR 25 crores to INR 27 crores we have made expenditure on that. So these 3 projects contribute to the CWIP item.

Okay. Rachit, how much is the maintenance CapEx yearly?

So it is almost INR 20 crores to INR 25 crores.

Okay. And Bhandari, sir, 1 request I have as a shareholder. We have been very open with our communication in past few years. But we do our AGM on the last day of the year, 30th of September. So can we please try to do it a bit earlier so that we as a shareholder can attend it because there's lot of conflict on the last day, a lot of companies doing the AGM and we have been communicating pretty well. So if you guys can think about it, it will be helpful.

Yes, we have noted down and we'll see what best we can do about this. So as I have got the data now. The first project was completed for INR 131 crore in 2016 and second project was completed for INR 120 crore in 2021 and third, the present one was completed in February 2022. So far the projects completed in 2016 so still we haven't got anything though paperwork from our side is 100% complete. So that is why I made that statement. Hope I'm able to make myself clear.

Yes. Sure, sir. And sir, if we can do the AGM in a physical AGM this year, that will also be helpful. We would like to travel and come and meet you guys.

Rachit ji and myself, we both have noted and we'll put it forward to the management.

And one last comment on dividend, sir. So we have been prepaying the loans and we have been doing pretty good work in terms of backward integration. So I would like to see my company investing and trying to do better rather than giving the money back to me that I would like to do. But I think you guys are doing pretty good. Thank you so much.

We'll take the last question that is from the line of B.R. Nahar from Mili Consultants.

Bhandari sahib, just 1 question again. This quarter and year we have increased our depreciation by changing the depreciation policy and have taken that much credit quite substantial. So are we going through now with 25% slab next year? Is this actually correct or something like that or this much...

Which slab of 45% you are talking about? Sorry, tax rate of 45%. I didn't get your question actually.

No, my question is that this quarter you have debited -- changed the depreciation policy and consequently, depreciation charge has gone up substantially and you have also taken credit of about INR 32 crores or something like that from the deferred credit account. So now 2 questions. This is that the still the effort expenditure account is still some -- you have some balance? And second is, are we going ahead on the new taxation policy of 25%?

No, depreciation is only a onetime adjustment that has been done. We have changed the residual value from 10% to 5% taking the technical advice and recommendations from the experts. So for that reason only the deferred tax asset has been created. So consequently so in the next year, the same will be adjusted towards coming depreciation in the next years. So that is only the onetime adjustment we are seeing.

[ Nahari ji ], I think what you are asking is we remain below MAT because of the ATIA benefit. We pay MAT every year so since ATIA exemption is there, so our actual under income tax law doesn't increase then the MAT itself. So more or less we shall remain in that bracket only.

Thank you. Ladies and gentlemen, that was the last question for today. We have reached the end of Question-and-Answer Session. I would now like to hand the conference over to the management for closing comments.

Thank you. Thank you, everybody, and we assure you we'll be doing our best in the future also and whatever impressions that we are carrying from our shareholders and investors, we'll carry it forward and see what best we can do for all the stakeholders. Thank you. Thank you for your interest once again. Bye bye.

Thank you. On behalf of Satia Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.